Overview of the Polish Energy Market & PGNiG Capital Group
6th Stakeholder Group Meeting
Gas Regional Initiative – Region South-South East
Gdynia, 26th June 2009
The Company’s history and key changes on the Polish Energy The Company’s history and key changes on the Polish Energy MarketMarket
1982
1982:PGNiG was established as the State-owned Enterprise PGNiG
1996
1996: State-owned Enterprise PGNiGis transformed into a joint-stock company wholly owned by the State Treasury
2004
2004:Ownership unbundling of the transmission activity – establishment of the PGNiG-Przesył Sp. z o.o. (currently OGP GAZ-SYSTEM S.A.).
OWNERSHIP UNBUNDLING
1997
1997:Establishment of the Energy Regulatory Office
2005
2005:23 September 2005 - PGNiG on the Warsaw Stock Exchange
2007
2007:1 July – introduction of Third Party Access Rule (as a result of Directive 2003/55/WE being implemented into Polish Energy Law)
2007:Leagal unbundling of distribution activities – establishment of 6 Distribution System Operators
LEGAL UNBUNDLING
2008
2008:PGNiG appointed as Storage System Operator (31 December 2008).
FUNCTIONAL & ACCOUNTING UNBUNDLING
2006
2006:Transmission Network Code approved by the Energy Regulatory Office 2008:
Distribution Network Codes approved by the Energy Regulatory Office
2009
2009:Storage Code – published for public consultations
Poland’s leading integrated gas and oil company
Leading gas and growing oil producer
Leading gas importer to Poland and owner of gas storages
Robust domestic gas distribution business
E&P – domestic production of natural gas (4.1 bcm) and crude oil (496 thousand tones);
International expansion in E&P;
Total sales – 13.9 bcm of natural gas;
Storages – 1.7 bcm of working capacity;
Retail – 6.6 million of end-customers;
Strong financial position; rating BBB+(S&P),
Baa1 (Moody’s)
Revenue – 4.4 billion EUR.
Key data *
PGNiG – Basic informationPGNiG – Basic information
Shareholder’s Structure **
* Data for 2008
**After shares distribution to employees
Business structure
WholesaleE&P Storage Transmission Distribution Retail
PGNiG
PGNiG Norway
POGC Libya
Service subsidiaries
Branches: Pakistan, Denmark, Egypt, Libya.
Six regional DSO PGNiG PGNiG PGNiG
Ownership unbundling
Legal unbundling
Functional and
accounting unbundling
Overview of PGNiG’s business Overview of PGNiG’s business
Vertically integrated business;
Leading position in key market segments;
Proven ability to manage regulatory risk across the
value chain.
The PGNiG’s Capital Group value is built on 6 main pillarsThe PGNiG’s Capital Group value is built on 6 main pillars
Ensuring the supply of
natural gas
The development
of E&P activities
Increase of gas storage
capacity
Raise profitability
of the gas distribution
activity
The development of
commercial activity
Enlargement of the areas and scale of operations
Transforming the company into a leader of the European fuel – energy market
Constant improvement of daily operations
Key Assumptions of PGNiG’s Group Strategy Key Assumptions of PGNiG’s Group Strategy
Gas market in Poland (1/2) Gas market in Poland (1/2)
Gas consumption per capita in 2007 (cm)Gas consumption (bcm/year)
Gas consumption per capita (cm/year)
85 85
58
50
37
12 1311 12
9
91
96
70
50
43
2116
1113
10
97
91
85
4643
34
1714 13
9
0
30
60
90
120
Germany United Kingdom
Italy Netherlands France Spain Belgium Poland Hungary CzechRepublik1997 2002 2007e
+14% +7%
+46%
-7%
+16%
+178%
+31%+30% +10%
-9%
(change in the last 10 years in %)
3 207
1 306
1 463
1 0091 191
1 039 915
313
628
273
3 106
1 5411 613
1 216 1 328
1 099931
491
723
293
2 837
1 641
1 494 1 4601 342
1 180
843762
692
359
0
700
1 400
2 100
2 800
3 500
Netherlands Belgium United Kingdom
Italy Hungary Germany Czech Republik
Spain France Poland1997 2002 2007e
-12%
+26%+2%
+45%+13%
+14%-8%
+143% +10%
+31%
(change in the last 10 years in %)
Less than 500 cm
500 cm - 1 000 cm
1 000 cm - 2 000 cm
More than 2 000 cm
Gas consumption per capita in Poland is very low - only 359 cm in 2007
Gas consumption per capita in Poland is more than 2 times lower than in Czech Republik and more than 3 times lower than in Hungary
Gas consumption – Poland vs Europe
Gas share in Primary Energy Sources in Poland is much lower than an average in the EU (13% against 24%);
It is a consequence of the extensive usage of coal (hard/brown) as the source of primary energy.
source: EuroGas
Source: IEA
40,4
24,9
17,7
12,8
4,3
23,9
13,3
61,8
1
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
oil natural gas coal nuclear hydro
UE Poland
Sales of natural gas in Poland – basic information
Gas market in Poland (2/2) Gas market in Poland (2/2)
Total gas sales in 2008: 13,9 bcmTotal gas sales in 2008: 13,9 bcm
33%
34%
7%
26%
Residential & Commercial Industry Power Other
7% 1%
36%
55%
Residential & Commercial Industry Power Other
Primary energy balance EU vs Poland
Natural gas sales by sector – EU (2007) Natural gas sales by sector – Poland (2007)
Gas production: increase gas production from 4,2 bcm to 6,2 bcm;
LNG: 1 million tonnes of LNG secured from Qatar;
Interconnectors: plans (ongoing analysis) to build two or three interconnectors on western and southern borders of Poland in order to extend Polish gas grid connection to EU network;
NW gas: gas supplies from Norwegian Continental Shelf;
SE gas: planned interconnector will reach Baumgarten gas hub and meet Nabucco pipeline;
Assumptions for diversification
Current sources of gas - 2008 Optimal sources of gas - 2015
Gas Supplies and Transport Routes Gas Supplies and Transport Routes
Eastern direction66%
Own production28%
Western direction6%
Eastern direction40%
Own production30%
LNG and Western direction
30%
In April 2009 PGNiG and Qatargas Operating Company signed the Head of Agreement in which Qatargas agreed that approx. 1 million tonnes of LNG will be supplied annually to LNG terminal in Świnoujście for a period of 20 years, starting from 2014;
Concurrently PGNiG and Qatargas are conducting talks with a view to entering into a Sales and Purchase Agreement.
9
Location of terminal:
Reloading capacity of terminal:
LNG tanks capacity:
Implementation date:
Świnoujście
Phase 1 – 2.5 bcm/annuallyPhase 2 – 5.0 bcm/annuallyPhase 3 – 7.5 bcm/annually
2 x 160,000 m3
2014
LNG deliveries to PolandLNG deliveries to Poland
Basic information – LNG Project
LNG deliveries – PGNiG S.A.
Companies responsible for LNG terminal construction: TSO Gaz-System/PLNG
Gas supplies from NCS to Central EuropeGas supplies from NCS to Central Europe
Skanled Project
Skanled
Polish coast Niechorze
NCS
Baltic Pipe
Danish transmission system
Main facts:
5 May 2009 the Skanled Project Group decided to suspend the Skanled project, due to:- increased commercial risk;- withdrawal of majority of Scandinavian companies;
- uncertainties related to timing of new field developments on NCS and gas supplies;
June 2009 – OGP Gaz-System decided to suspend the Baltic Pipe project.
2009 PGNiG SA owns and uses
6 underground gas storage facilities:
5 UGS in partly depleted natural gas fields:
UGS Brzeźnica, UGS Husów, UGS Strachocina, UGS Swarzów and UGS Wierzchowice
1 UGS in salt cavern: UGS Mogilno.
Working capacity for 2009/2010 (bcm) - 1.6
No of storage facilities in 2015 - 9
Target working capacity (bcm) – 3.8
Estimated CAPEX (PLN bn) – 3.0
Warszawa
G d ańs k
G u sto rzyn
O lsztyn
P o zna ń
K raków
P io trkó wTryb una lsk i
Ja ros ła w
W roc ław
K a tow ice
UGSMogilno
UGSSwarzów
UGSBrzeźnica
UGSHusów
UGSStrachocina
UGSWierzchowice
UGS Daszewo
UGS Kossakowo
UGS Bonikowo
Existing UGS
Planned UGS
UGS expansion
Planned UGS for low-methane gas
Expansion of Underground Gas Storage FacilitiesExpansion of Underground Gas Storage FacilitiesBasic data
2015+
Recent changes
Current working capacity:
1.6 bcm
Target working capacity:
3.8 bcm
1 November 2008 – establishment of PGNiG – SSO Branch in Warsaw;
31 December 2008 – PGNiG appointed for Storage System Operator in Poland;
May 2009 - Market scereening process conducted by the SSO Branch
16 June 2009 – Tariff for storage services approved by the Energy Regulatory Office;
June 2009 – Storage Code published for public consultations.
UGS – construction and development
International expansion of PGNiG started with the acquisition of a stake in E&P concession on Norwegian Continental Shelf (North Sea Skarv, Snadd and Idun fields).
Currently, PGNiG undertakes E&P activities also in the following regions:
• Egypt (Bahariya field),
• Libya (Murzuq basin),
• Pakistan (Kithar concession block),
• Southern Denmark.
Norway
Pakistan
Tunesia
Egypt
Libya
Denmark
PGNiG exploration and production activities will concentrate on Norwegian Continental Shelf and in the Maghreb region.
Currently, PGNiG plans to engage in new projects in Northern Africa, with Algeria as a potential new country of interest.
Development of Oil and Gas Exploration & ProductionDevelopment of Oil and Gas Exploration & Production
14,5 14,115,4
17,1
1920,2
0
5
10
15
20
25
2006 2010 2015 2020 2025 2030
bcm
Natural gas demand New investments in power sector
Prospects for future gas consumptionProspects for future gas consumption
* Ministry of Economy – forecast
EC Stalowa Wola 400 MW
EC ZA Tarnów 200 MW
EC Bydgoszcz 100 MW
EC Lotos230 MW
Pozosta?e gazowe projekty
energetyczne1000 MW
EC Stalowa Wola 400 MW
EC ZA Tarnów200 MW
EC Bydgoszcz 100 MW
EC Lotos230 MW
Pozosta?e gazowe projekty
energetyczne1000 MW
Other gas fired power projects
1000 MW
Planned capacity ≈ 2000 MW
Planned gas demand ≈ 2-2,4 bcm
Gas sales to power plants (2007)
82,81
97,38
37,60
12,75 17,44
39,71
85,89
13,81
45,82
35%
31%
20%
7%
1%
40%
36%35%
11%
-
20
40
60
80
100
120
Italy UnitedKingdom
Spain Hungary Belgium Netherlands Germany Poland France
bcm
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Natural gas consumption (bcm) Natural gas sales to power sector (%)
Share of sales to power plants in total gas sales is currently very low in Poland.
In Poland only 7% of gas is sold to power plants, whereas in Hungary 35% (both countries have almost equal total gas sales).
Most probably the situation will change in the future (as a result of investments in the power sector) and sales to power plants will increase.
* Source: Eurogas
Thank you!